Cheaper cement, lower costs: GST cuts could revive affordable housing

GST Council has cut cement tax to 18% and reduced rates on key building materials, easing costs for developers and homebuyers. Experts say the move could revive affordable housing, fuel jobs

The 56th GST Council, chaired by Finance Minister Nirmala Sitharaman, on Wednesday slashed tax rates on several key construction materials. The changes, effective September 22, 2025, are expected to reduce building costs and bring relief to both developers and homebuyers.

 

GST revision

The Council simplified GST into two main slabs: 5 and 18 per cent -- along with a 40 per cent 'sin tax' for select goods.

 

For real estate and construction, the following rate cuts matter most:

 

Cement: Down to 18 per cent from 28 per cent

Sand lime bricks, stone inlay work: 5 per cent from 12 per cent

Particle boards, bamboo flooring, veneering sheets, wooden joinery: Mostly 12 per cent to 5 per cent

Ceramic tableware, porcelain and stone articles: 5 per cent from 12 per cent 

 

Why this matters for affordable housing

Cement is among the costliest inputs in construction. A 10 percentage point GST cut can lower overall project costs by 3-5 per cent, according to Anarock Research. For affordable housing developers, this means lighter cash flow pressure and better margins.

 

“The reduction in GST on cement and other key materials is a landmark reform,” said Ramani Sastri, chairman and MD of Sterling Developers. “It will bring relief to the sector during the festive season, ease cost pressures, and give buyers more confidence to invest in homes, especially in the affordable and mid-segments.”

 

The uniform 5 per cent rate on materials like bricks and wooden flooring also reduces classification disputes, making compliance easier and projects more predictable.

 

If passed on, buyers could see more reasonably priced homes, especially in the below ₹40 lakh segment, which has been shrinking in supply.  "This is a game-changing initiative that is expected to stimulate demand across sectors and provide a much-needed boost to manufacturers, suppliers, and developers alike... This reduction will help bring down the overall cost of raw materials, ultimately benefiting homebuyers and boosting housing affordability, Shekhar Patel, president of CREDAI said. 

 

Shrinking supply, possible revival

The affordable housing segment has seen its share of sales shrink from 38 per cent in 2019 to just 18 per cent in 2024. Anuj Puri, Chairman of Anarock Group, pointed out that reduced construction costs can improve margins and revive demand. “If these savings are passed on to homebuyers, it could bring first-time buyers and fence-sitters back to the market, particularly in smaller cities,” he said. 

 

Ripple effects across real estate

While the affordable housing segment may see gains, industry players across real estate expect benefits.

 

Industry players believe the move will have ripple effects across the economy. Co-working operator Manas Mehrotra, founder of 315Work Avenue, explained that while B2C sectors like FMCG will see direct consumer savings, the benefit for flexible office providers lies in cash flow.

 

“We invest heavily in infrastructure and fit-outs. Although input credits are available, the upfront GST outflow has always strained working capital. Lower rates will help us plan growth better and expand more efficiently,” he said.

 

Luxury housing developers are also upbeat. “The GST rationalisation is expected to increase savings, boost consumption and improve liquidity,” said Lincoln Bennet Rodrigues, chairman and founder of Bennet & Bernard in Goa. “For real estate, lower costs will create a positive environment that encourages investment in property as a stable asset class.” 

 

Job growth in real estate

Aniruddha Bhanuprasad Mehta, chairman and managing director, Umiya Buildcon Limited, pointed out that real estate is the second-largest employment generator in India after agriculture. This tax rationalisation could, therefore, unlock fresh capital for expansion.

 

“A simplified GST regime will stimulate growth across the ecosystem. Lower input costs and improved cash flows will allow developers to scale projects faster, thereby creating more jobs in construction, allied manufacturing, and services,” Mehta said. 

 

Mixed bag for commercial real estate

While residential builders stand to benefit most, commercial real estate faces a mixed bag. Developers will no longer get input tax credits on commercial leasing, and tenants must bear 18 per cent GST under reverse charge for rentals from unregistered landlords.

 

"This retrospective amendment may increase operational costs and rental prices for office spaces and other commercial properties," Puri said. 

 

Bottom line

Industry experts largely agree that overall, the reforms mark a decisive step.

 

“Industry players will need guidance on transitional provisions, particularly regarding the flow of tax credits on prior procurement, as this could impact immediate working capital cycles,” Mehta stated.

 

By easing tax rates on essentials, clearing up disputes and simplifying compliance, the government hopes to give housing and real estate a push ahead of the festive season.

 

As Sastri put it, “A rationalised GST regime will not only make homes more affordable but also reinforce housing as a driver of sustainable growth in India’s long-term story.”